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(Technical) Default Watch ’14: Argentina

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Today’s the big day for the uniquely recalcitrant debtor’s second big D in 13 years, now that its least favorite jurist has reiterated once again that, its best efforts not withstanding, it isn’t allowed to pay only the creditors it wants to pay while piously promising to “meet its obligations, pay off its debts and honor its commitments,” except maybe to these vulture usurers “trying to bring us down to our knees.” Well, maybe not the big day, since failure to pay today—and U.S. District Judge Thomas Griesa made very clear that the “illegal” payment “will not be made,” or he’s gonna start holding people in contempt—amounts to a mere “technical” or “selective” default for 30 days. Then, maybe Moody’s will do something about it.

Moody's Investors Service wouldn't automatically cut the Caa2 rating it has on Argentina's foreign-law bonds if restructured bondholders don't get paid on Monday, said Gabriel Torres, a senior sovereign-ratings analyst at Moody's. Another downgrade would depend on how much money restructured bondholders are expected to lose as a result of the missed payment. The current rating indicates an expectation of up to 20% in losses for holders of Argentina's restructured bonds.

"To move Argentina lower than Caa2, it wouldn't be enough for the country to default," Mr. Torres said. "There would need to be relatively big losses for restructured bondholders."

Argentina Bond Battle Enters New Phase [WSJ]
U.S. Judge Says Argentina Can’t Pay Some Bondholders [WSJ]
Federal Judge Says Argentina’s $539 Million Attempt at Payment Is Illegal [DealBook]
Argentina at Brink of Default at $539 Million Payment Due [Bloomberg]


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